Affordability may have improved only slightly in recent times – but more relief could be on the way this year, says broker
Canada’s housing market is still split along highly regional lines, with home prices and sales activity varying wildly from one province to the next – but one thing most of its markets have in common is stretched affordability for first-time buyers.
While prices are falling across many areas, there are still only five major cities in Canada where buyers with an income below six figures can snag a property, according to Ratehub.ca’s latest analysis: Regina, Fredericton, Edmonton, Winnipeg, and St. John’s.
That means even hopeful buyers in cities traditionally seen as affordable are faced with big challenges putting together the downpayment to purchase a home.
But a cooler market overall has still brightened the outlook for prospective first-time homeowners compared with the frenzy of the COVID-era housing market.
“I’ve seen a few more first-time homebuyers in recent months since there has been more inventory on the market,” John Vo (pictured top), a Dartmouth, Nova Scotia-based broker with Premiere Mortgage Centre, told Canadian Mortgage Professional.
“Because there’s more inventory, first-time homebuyers have more options and they’re also getting homes at a more reasonable price as sellers are now entertaining [offers] below asking price in many cases.”
Still, while home sales have been on the wane in Nova Scotia in recent months, prices are proving resilient. The MLS HPI (home price index) composite benchmark price rose by 5.9% in November compared with the same time last year, jumping to $426,400, another hurdle for buyers to contend with even despite less competition.
Parents and family members continue playing a crucial role
The so-called “Bank of Mom and Dad” has been a big trend across Canadian housing markets as new buyers turn to family assistance to afford a downpayment – and unsurprisingly, it’s also proving an increasingly prominent part of Nova Scotia’s housing market.
Both co-signing and gifted downpayments, according to Vo, are becoming more common among homebuyers. “I would say more parents are refinancing their homes to be able to gift the downpayment to their children,” he said.
“Co-signing can be challenging for parents if they’re on a reduced retirement income or still have a mortgage and other debts – but I have been seeing it happen more often than in the past.”
A range of factors are stacked against first-time homebuyers in plenty of markets: the fact that they don’t have a home they’ve built equity in, their usually lower incomes than other buyer types, and other considerations including student loans and credit card and car loan debt.
The federal government’s decision to allow 30-year amortization periods for first-time buyers was a “great change,” Vo said, although he also believes further steps are required.
“It would be great if they would allow first-time homebuyers to do 100% financing so they don’t have to come up with the downpayment, or waive costs like the Deed Transfer Tax, which is 1.5% in the Halifax Regional Municipality,” he said. “Or maybe they could have a bit looser qualification rules for first-time homebuyers to help them qualify for a bit more home.”
Better times could be ahead for first-time buyers
The good news for first-time buyers: while affordability gains to date may have been marginal, Vo sees further improvement ahead, with no sign yet that purchase activity will turn a corner.
Geopolitical turmoil, economic uncertainty at home and the likelihood of a protracted interest rate pause by the Bank of Canada mean most observers aren’t expecting the national housing market to roar into life this year.
The upcoming wave of mortgage renewals at much higher rates, meanwhile, could bring even more supply to the housing market as homeowners simply opt to sell rather than grappling with higher costs.
“I think that affordability in 2026 and 2027 will further improve as some people will be forced to sell their homes – to access closer to 100% of the market value of their home, less selling costs – as opposed to refinancing a mortgage, on which we can only lend up to 80% of the appraised value of their home,” Vo explained.
“In 2024 and 2025, many people were able to simply refinance their mortgage if they were in financial trouble because they had so much equity in their home, while I don’t think people renewing in 2026 and 2027 will have as much equity in their homes.”
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